Business Form and Taxation: Pros and Cons

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When you're starting a business, one of the first decisions you'll have to make is whether to be a sole proprietorship, partnership, corporation, limited liability company, or nonprofit organization. The type of business form you choose will depend on the nature of your business, the goals of the business, and other factors -- including taxation.

While taxes should not be your only consideration when choosing a business legal structure, it's a good idea to compare the tax obligations and regulations of each. The taxation pros and cons of each type of business form are listed in the following chart.

-S Corporation may elect to be treated as a partnership for federal tax purposes with shareholders reporting their share of the corporation's separately listed items of income, deductions, loss, and credit on their personal tax returns

-Shareholders have personal limited liability

-S Corporation may not have more than seventy-five shareholders

-Shareholders and those owning 5 percent or more in stock have limited employee benefits

There are many factors to consider when deciding on the best legal structure for your business, including tax implications. An attorney can not only help determine the right business structure, but can also prepare the necessary paperwork to set it up. There are tax law attorneys near you who can help you make the right choices for your business.

Next Steps

Contact a qualified business organizations attorney to help you choose the best formation for your business.